Investors refused to be buoyed yesterday by news that Egyptians had appeared to approve a new constitution in a referendum, seen as a critical step towards rebuilding their nation's beleaguered economy.
Egyptian stocks fell for the first time in four days as concern that the government will fail to revive economic growth overshadowed the apparent results of the vote.
The EGX 30 Index declined 1.5 per cent to 5,362.16 points at the close in Cairo, the biggest retreat since December 10. The benchmark gauge has still advanced 48 per cent this year, the sharpest rally since 2007.
"In theory, the constitution's approval means we're on the road to stability," said Ashraf Akhnoukh, the manager for the Middle East and North Africa markets at Commercial International Brokerage in Cairo.
"But in reality, the economy remains a huge challenge and it's a big question whether this government will be able to stimulate recovery."
Also adding to the uncertain mood yesterday, conflicting reports claimed that the central bank governor, Farouk El Okdah, had resigned, only for the news to be swiftly denied by the cabinet.
Mr El Okdah had indicated before that he planned to retire by the end of the year for health reasons, according to local press reports.
The president Mohammed Morsi's supporters maintain that the push to approve the charter is key to restoring order in the Arab world's most populous nation as it struggles with a faltering economy, high unemployment and a flight of foreign capital.
The next step is to hold elections for the lower house of parliament, which was disbanded by court order earlier this year. Mr Morsi, who became Egypt's first freely elected civilian leader when he won a presidential vote in June, this month postponed Egypt's application for a US$4.8 billion (Dh17.63bn) IMF loan.
The economy has struggled to rebound from last year's uprising, pressured by frequent strikes, civil strife and divisive politics. International reserves are down to about $15bn, a fall of more than 50 per cent before the uprising.
Growth is projected to come in at 3 per cent over the next three years, less than the 4 per cent needed to prevent the unemployment rate from rising, according to the British-based consulting firm Maplecroft.
Yesterday, reports said that Dubai's Majid Al Futtaim (MAF) was in talks with Egypt's Mansour Group to buy its supermarket business in a deal valued at $200 million to $300m.
Those discussions signal increased appetite by Arabian Gulf firms to expand in Egypt at a time when valuations are low.
BNP Paribas agreed to sell its Egyptian arm for $500m to the Dubai lender Emirates NBD last week, and Société Générale earlier agreed to sell its majority stake in National Société Générale Bank to Qatar National Bank for $2bn.
But the interest in Mansour Group's supermarket business shows the focus may now be spreading from banking to other sectors where growth prospects are seen as promising in the longer term.
MAF, the franchisee for Carrefour hypermarkets in 19 countries, is keen on expanding in Egypt through acquisitions, according to one Dubai-based banking source who is aware of the discussions, Reuters reported.
"As a regional investor, MAF would be more comfortable with the long-term prospects of Egypt than other foreign investors," the source said. "No matter what the shape of the economy, people still need to buy their groceries."